The Indian market has experienced its fair share of highs over the last couple of years. With the Nifty now kissing the 10,000 mark, the last six months have been an upward trajectory in particular. Such a raging bull market usually gives rise to the temptation of tinkering with your Mutual Fund portfolio. While extensive shuffling may not be called for, here are some useful strategies that you can look to deploy in a subtle manner:
The concept of value investing is directed towards achieving long-term wealth creation in a sustained and disciplined manner. A value-oriented Mutual Fund focuses on stocks that are structurally sound and undervalued in an overheated market.
A long-term investor entering the market at a time like this might find that such funds have a place in a fresh equity portfolio. Although a slightly defensive ploy, the buy-and-hold strategy of value investing ensures success over long time horizons.
For existing investors, a bull market can present the ideal opportunity to reduce excessive froth from the portfolio, and step out of the market for some time on booking profits at high levels.
The markets might continue to rise even after such a sale, but it is especially prudent to continue to hold onto funds investing in companies that are likely to prosper even when markets are down.
There is also the inclination to frequently shuffle an equity portfolio by replacing funds with those that are category toppers. This is a dangerous thing to do. However, such funds, having made the most of the bull run tend to be affected the most when the markets reverse direction.
Always monitor a fund’s long-term performance and refrain from getting swayed by its statistics from the recent past. A fund that has beaten its benchmark over several market cycles always makes for a handy component of an ideal Mutual Fund portfolio, even if it falls short during the exuberance of one market peak or the other.
(The writer is CEO, BankBazaar.com)